When thinking about doing business in Mexico, cities like Mexico City, Guadalajara and Monterrey immediately come to mind, but what about Aguascalientes? Home to 60 IT firms, including two of Mexico’s largest software development firms, Hildebrando and Softtek, with a Westernized infrastructure, low crime, and a growing talent pool, Aguascalientes is becoming “the small state that could.

Gabriel Ornelas, Director of Hildebrando Aguascalientes explained that, “Aguascalientes is considered a delivery center where you can reduce costs; the city is defined as one of the easiest states to do business in.” With 1.2 million people, Aguascalientes consistently ranks in the top three Mexican cities for its business friendly climate. “It’s a small state, but with very talented people who will try to have a career path, and there is very low attrition.”

Even though Aguascalientes offers a high quality of life, the slower pace, lack of outdoor activities, nightlife and –in general– lower salaries has made it difficult to attract a younger workforce.

Service First Culture

The city’s motto “Home of the Friendly People” is reflected in the great customer service provided by the people of Agauscalientes, according to Ann Harts, Principal/Founder of the advisory firm HartsGroup, Inc., “All Mexican cities have positives and negatives, but Aguascalientes has always come out with strong opportunities.”

Aguascalientes expanded its industry from manufacturing textiles to automotives when Nissan opened one of its biggest plants there. The first tech cluster in Mexico was founded in the city, encouraging software development and innovation. Eight of the most important Mexican universities are located in Aguascalientes, and most of the universities have IT programs.

Hector Ortiz Gomez, Director of Business Development for Hildebrando, told us that their Aguascalientes location is a CMMI 5 service center focusing on the US market. However, said Ornelas, English proficiency remains a challenge, and the dearth of bilingualism has led companies to recruit employees, who often command higher salaries, from other Mexican states. Even though Aguascalientes offers a high quality of life, the slower pace, lack of outdoor activities, nightlife and –in general– lower salaries has made it difficult to attract a younger workforce.

US Orientation

“The majority of companies work for US customers 90% of the time,” Ornelas explained, “Before there were a lot of developers, with one person responsible for the group. Now everyone is involved in the initial stages of project and interaction with clients. They might understand, but it is difficult to communicate ideas in English.” Recognizing the issue, the new Aguascalientes government is starting an initiative to conduct technical classes in English. Beginning in August, Hildebrando will teach one subject at one university as a pilot. If the results are positive, other companies and universities will participate in the future.

Overseen by the Sector Desarollo Economocico (SDEC), two programs supported by the federal and local governments foster the cluster:

PROSOFT is responsible for “looking for growth in the long term in the country by encouraging national and international competitiveness.” In order to be eligible for funds from PROSOFT, an IT company must first create jobs and contribute to the local economy. During 2009-2010 companies in Aguascalientes received 80 million pesos.

MexicoFIRST is an initiative supported by Ministry of Economy and the World Bank, “to generate human capital in order to strengthen the labor supply in both quantity and quality, to facilitate the development and competitiveness of Mexican firms, and attract foreign investment to Mexico.” MexicoFIRST also provides facilities and space for companies to operate from, and helps smaller companies develop products.

The Servicios Nacional de Empleo has created a database of graduating students that is shared with tech companies. However, of the 6,000 graduates, only 1,000 are entering the IT field, and most of them will work for the government. Through the Secretaria de Trabajo the government has also established an internship program that pays salaries for three-months. In the IT sector, participation has grown from 500 people in 2008 to between 700 and 750 people during 2009-2010. There is also a government-backed training program that requires trainees to pay up front and take a certification exam. If they pass, they are reimbursed 65% of the costs, and the host company will reimburse the remaining 35%.

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During her market study of Aguascalientes, Harts found:

· The city is planned around three beltway loops allowing for ease of transportation and access· Electricity ring around city equals 100% blackout free· 7 fiber optic rings cover the city, providing 100% coverage· A lack of available real estate, but the government has not released any quantifiable data on this issue· The city and streets are very clean with a strong police presence· One of the lowest (if not the lowest) crime rates in Mexico· As of 2007 it is mandatory to teach English in the schools· English reading and writing skills are good, but spoken is average· 25+ educational institutions (colleges, universities) with 35,000 plus students· Eight museums· Four live performance theaters· Cultural centers· 55 movie theaters and an Imax screen

Of the focus group respondents:

· 86% have either lived in or recently visited the US
· 100% have internet· 100% see English as the language of commerce and critical for future success· 100% viewed call center work as a career opportunity

Ornelas points out that IT firms in Aguascalientes are oriented toward particular areas like Microsoft and Java, and the colleges teach to that. There is not a lot of experience with mobile applications, or exposure to technologies like Business Intelligence which creates a competitive disadvantage.

Harts advises with BPO “there is some concern about the bilingual capability. It is better to ramp slowly and test market, rather than going in with 1,000 employees.” And due to the presence of Softtek, Nissan, Texas Instruments and Monterrey Tech, the ITO sector “has a good supply of engineers and software developers.”

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